CORPORATE GOVERNANCE:
AUDIT COMMITTEE CHARTER

EXHIBIT B
CHAMPION INDUSTRIES, INC.
CHARTER - AUDIT COMMITTEE

Committee Role
The committee’s role is to act on behalf of the board of directors and oversee all material aspects of the company’s reporting, control, and audit functions, particularly the accounting and financial reporting processes of the company and the audits of the financial statements of the company, except those specifically related to the responsibilities of another standing committee of the board.  The audit committee’s role includes a particular focus on the qualitative aspects of financial reporting to shareholders and on company processes for the management of business/financial risk and for compliance with significant applicable legal, ethical, and regulatory requirements.

The committee shall be directly responsible for the appointment, compensation, retention and oversight of the work of the external auditors engaged by the company (including resolution of disagreements between management of the company and such auditors regarding financial reporting for the purpose of preparing or issuing an audit report or performing other audit services).

The external auditors shall report directly to the audit committee.

The role also includes coordination with other board committees and maintenance of strong, positive working relationships with management, external auditors, counsel, and other committee advisors.


Committee Membership
The committee shall consist of at least three independent, nonexecutive board members.  The board will appoint committee members.  Committee members shall meet the independence and experience requirements of the NASD Manual and other applicable laws and regulations.  Those requirements on the date of revision of this charter are listed in Exhibit A attached hereto and incorporated herein by reference.

Committee appointments shall be approved annually by the full board.  The committee chairperson shall be selected by the committee members or by the full board.


Committee Operating Principles
The committee shall fulfill its responsibilities within the context of the following overriding principles:

  • Communications - The chairperson and others on the committee shall, to the extent appropriate, have contact throughout the year with senior management, other committee chairpersons, and other key committee advisors, external and internal auditors, etc., as applicable, to strengthen the committee’s knowledge of relevant current and prospective business issues.

  • Committee Education/Orientation - The committee, with management, shall develop and participate in a process for review of important financial and operating topics that present potential significant risk to the company.  Additionally, individual committee members are encouraged to participate in relevant and appropriate self-study education to assure understanding of the business and environment in which the company operates.

  • Annual Plan - The committee, with input from management and other key committee advisors, shall develop an annual plan responsive to the “primary committee responsibilities” detailed herein.  The annual plan shall be reviewed and approved by the full board.

  • Meeting Agenda - Committee meeting agendas shall be the responsibility of the committee chairperson, with input from committee members.  It is expected that the chairperson would also ask for management and key committee advisors, and perhaps others, to participate in this process.

  • Committee Expectations and Information Needs - The committee shall communicate committee expectations and the nature, timing, and extent of committee information needs to management, internal audit, and external parties, including external auditors.  Written materials, including key performance indicators and measures related to key business and financial risks, shall be received from management, auditors, and others at least one week in advance of meeting dates.  Meeting conduct will assume board members have reviewed written materials in sufficient depth to participate in committee/board dialogue.
     
  • External Resources - The committee shall be authorized to access internal and external resources, as the committee requires, to carry out its responsibilities. The committee may engage and shall have access to its own independent counsel and other advisors at the committee’s sole discretion.  The company shall provide for appropriate funding, as determined by the committee, for payment of compensation of the external auditor and any independent counsel and other advisors engaged by the committee.

  • Committee Meeting Attendees - The committee shall request members of management, counsel, internal audit, and external auditors, as applicable, to participate in committee meetings, as necessary, to carry out the committee responsibilities.  Periodically and at least annually, the committee shall meet in private session with only the committee members.  It shall be understood that either internal or external auditors, or counsel, may, at any time, request a meeting with the audit committee or committee chairperson with or without management attendance.  In any case, the committee shall meet in executive session separately with internal and external auditors, at least annually.

  • Reporting to the Board of Directors - The committee, through the committee chairperson, shall report periodically, as deemed necessary, but at least semi-annually, to the full board.  In addition, summarized minutes from committee meetings, separately identifying monitoring activities from approvals, shall be available to each board member at least one week prior to the subsequent board of directors meeting.

  • Committee Self Assessment - The committee shall review, discuss, and assess its own performance as well as the committee role and responsibilities, seeking input from senior management, the full board, and others.  Changes in role and/or responsibilities, if any, shall be recommended to the full board for approval.

  • Independent Board Members - The full board is composed of executive and nonexecutive members.  Independent members are nonexecutive members who have no relationship to the corporation that in the opinion of the corporation’s board of directors, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director.


Meeting Frequency
The committee shall meet at least quarterly.  Additional meetings shall be scheduled as considered necessary by the committee or chairperson.


Reporting to Shareholders
The committee shall make available to shareholders a summary report on the scope of its activities.  This may be identical to the report that appears in the company’s annual report or proxy statement.


Committee’s Relationship with External Auditors

  • The committee shall be directly responsible for the appointment, retention, compensation and oversight of the external auditors.
     
  • The external auditors, in their capacity as independent public accountants, shall be responsible to the board of directors and directly to the audit committee as representatives of the shareholders.
     
  • As the external auditors review financial reports, they will be reporting directly to the audit committee.  They shall report all relevant issues to the committee responsive to agreed-on committee expectations.  In executing its oversight role, the board or committee should review the work of external auditors.
     
  • The committee shall annually review the performance (effectiveness, objectivity, and independence) of the external auditors.  The committee shall ensure receipt of a formal written statement from the external auditors consistent with standards set by the Independence Standards Board.  Additionally, the committee shall discuss with the auditor relationships or services that may affect auditor objectivity or independence.  If the committee is not satisfied with the auditors’ assurances of independence, it shall take or recommend to the full board appropriate action to ensure the independence of the external auditor.
     
  • The committee shall at least annually preapprove all auditing services and non-auditing services provided by an external auditor (and shall disclose to investors in periodic reports required by Section 13(a) of the Securities Exchange Act of 1934 any approved non-audit services.
     
  • If the external auditors identify significant issues relative to the overall board responsibility that have been communicated to management but, in their judgment, have not been adequately addressed, they should communicate these issues to the committee chairperson.

  • Changes in the directors of corporate compliance shall be subject to committee approval.
     

Primary Committee Responsibilities
Monitor Financial Reporting and Risk Control Related Matters

The committee should review and assess:

  • Risk Management - The company’s business risk management process, including the adequacy of the company’s overall control environment and controls in selected areas representing significant financial and business risk.
     
  • Annual Reports and Other Major Regulatory Filings - All major financial reports in advance of filings or distribution.
     
  • Internal Controls and Regulatory Compliance - The company’s system of internal controls for detecting accounting and reporting financial errors, fraud and defalcations, legal violations, and noncompliance with any corporate code of conduct, and any reports of the chief executive officer, chief financial officer or other officers disclosing (i) significant deficiencies in the design or operation of internal controls which could adversely affect the company’s ability to record, process, summarize and report financial data and (ii) any fraud, whether or not material, that involves management or other employees who have a significant role in the company’s internal controls. 
     
  • Internal Audit Responsibilities - The annual audit plan and the process used to develop the plan.  Status of activities, significant findings, recommendations, and management’s response.
     
  • Regulatory Examination - SEC inquiries and the results of examinations by other regulatory authorities in terms of important findings, recommendations, and management’s response.
     
  • External Audit Responsibilities - Auditor independence and the overall scope and focus of the annual/interim audit, including the scope and level of involvement with unaudited quarterly or other interim-period information.
     
  • Financial Reporting and Controls - Key financial statement issues and risks, their impact or potential effect on reported financial information, the processes used by management to address such matters, related auditor views, and the basis for audit conclusions.  Important conclusions on interim and/or year-end audit work in advance of the public release of financials.
     
  • Auditor Recommendations - Important external auditor recommendations on financial reporting, controls, other matters, and management’s response.  The views of management and auditors on the overall quality of annual and interim financial reporting.
     

The committee should review, assess, and approve:

  • Any code of ethical conduct adopted by the corporation.

  • On an annual basis, the audit committee charter.
     
  • Changes in important accounting principles and the application thereof in both interim and annual financial reports.
     
  • Significant conflicts of interest and related-party transactions.
     
  • External auditor performance and changes in external audit firm (subject to ratification by the full board).
     
  • Changes key financial management.

  • The committee shall establish procedures for:

    (A) the receipt, retention, and treatment of complaints received by the company regarding accounting, internal accounting controls, or auditing matters; and

    (B) the confidential, anonymous submission by employees of the company of concerns regarding questionable accounting or auditing matters. 


EXHIBIT A

INDEPENDENCE
(14) “Family Member” means a person’s spouse, parents, children and siblings, whether by blood, marriage or adoption, or anyone residing in such person’s home.

(15) “Independent director” means a person other than an officer or employee of the company or its subsidiaries or any other individual having a relationship, which, in the opinion of the company’s board of directors, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director.  The following persons shall not be considered independent:

(A) a director who is, or at any time during the past three years was, employed by the company or by any parent or subsidiary of the company for the current year or any of the past three years;

(B) a director who accepts or who has a Family Member who has accepted any payments from the company or any parent or subsidiary of the company in excess of $60,000 during the current or any of the past three fiscal years, other than the following: (i) compensation for board or board committee service; (ii) payments arising solely from investments in the company’s securities; (iii) compensation paid to a Family Member who is a non-executive employee of the company or a parent or subsidiary of the company; (iv) benefits under a tax-qualified retirement plan, or non-discretionary compensation; (v) loans permitted under Section 13(k) of the Securities and Exchange Act of 1934.

(provided, however, that audit committee members are subject to heightened requirements under NASD Rule 4350(d) (see (G)  below);

(C) a director who is a Family Member of an individual who is, or at any time during the past three years was, employed by the company or by any parent or subsidiary of the company as an executive officer;

(D) a director who is, or has a Family Member who is, a partner in, or a controlling shareholder or an executive officer of, any organization to which the company made, or from which the company received, payments for property or services in the current or any of the past three fiscal years that exceed 5% of the recipient’s consolidated gross revenues for that year, or $200,000, whichever is more, other than the following:

(i) payments arising solely from investments in the company’s securities; or

(ii) payments under non-discretionary charitable contribution matching programs.

(E) a director of the listed company who is, or has a Family Member who is employed as an executive officer of another entity where at any time during the past three years any of the executive officers of the listed company serve on the compensation committee of such other entity; or

(F) a director who is or has a Family Member who is a current partner of the company’s outside auditor, or was a partner or employee of the company’s outside auditor who worked on the company’s audit at any time during any of the past three years.

(G) a director who, other than in his capacity as a member of the audit committee, the board of directors or any other board committee of the corporation, accepts directly or indirectly any consulting, advisory or other compensatory fee from the company or any subsidiary, or is an affiliated person of the company or any subsidiary.

EXPERIENCE
All audit committee members must be able to read and understand fundamental financial statements, including a company’s balance sheet, income statement, and cash flow statement at the time they join the board.  In addition, at least one audit committee member must have past employment experience in finance or accounting, requisite professional certification in accounting, or any other comparable experience or background which results in the individual’s financial sophistication, including being or having been a chief executive officer, chief financial officer or other senior officer with financial oversight responsibilities.